25.05.2016

Manufacturing in Far East requires up-front funding

You know when a car manufacturer is struggling to promote a cheap-and-cheerful box on wheels. Its sparse features and unimpressive performance are unlikely to make it a natural best seller. So the TV advertising campaign veers away from the technical specs of the car and focuses instead on the fun and lifestyle opportunities that buyers are sure to derive from their £8,950 purchase.

Quality high-end cars need no promotional artifice, however. The best known marques sell on the strength of their brand image, and a reputation for attention to detail. But it is not just the vehicle which projects the aura of perfection. Everything associated with it, including optional extras such as branded luggage must be to the same high standard. Companies selling their luxury lines into these manufacturers must excel at product design and then be able to translate that into products which further enhance the brands they are supporting.

A UK company based in the West Midlands has a glowing track record in this field. It has been designing and sourcing luxury goods for premium brands since 2000. It has built its own reputation delivering quality products to a spectrum of customers including high-profile motor manufacturers.

As the volume of goods being taken up by those companies increased over the years, the UK design specialist established relationships with manufacturers in the Far East to produce its products more cost-effectively than in Europe.

Designing luggage to match brand values

A recent order for branded luggage from a vehicle manufacturer brought a new dimension to the UK company’s funding cycle. In line with standard practice in so many sectors, it works with a factoring company to release funds against the value of its invoices to its customers. This increases liquidity from the point of delivery, but the facility cannot be used to provide the funds earlier in the order cycle. The manufacturer in the Far East, however, requires a 30% down payment with the remaining 70% before the stock is shipped back to the UK. This wholly reasonable demand was nonetheless a potential threat to the UK designer’s ability to fulfill the new order.

Fortunately, the company’s financial advisors had attended a breakfast seminar on funding mounted by Trade & Export Finance Ltd (TAEFL) at Aston. They were therefore aware of the approach taken by TAEFL to ensure that valuable orders are not lost simply because otherwise sound companies are unable to finance key parts of the order process. It was therefore a short step to making contact with TAEFL’s new business team, which was able to establish the company’s requirements.

The funding was put into perspective: it appeared that the UK design company would need £150,000 to finance the new order until it could complete the process, deliver stock to its customer and release a percentage of the value from its factoring company.

After the due diligence which is an essential part of every agreement entered into by the TAEFL Group of companies, agreement was reached and funds were released to pay the manufacturer. When the order is complete, the remainder of the production and shipping costs will be paid. Until the advances have been cleared, TAEFL retains legal ownership of the stock that has been funded.

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